Question: 4. There is now a foreign demand shock such that the IS curve shifts left by 1.5 units at all levels of the interest rate.

 4. There is now a foreign demand shock such that the

4. There is now a foreign demand shock such that the IS curve shifts left by 1.5 units at all levels of the interest rate. The new IS curve is given by I32: Y = 10.5 1.5T 301' + 20 The government asks the Central Bank to stabilize the economy at full employment. To stabilize and return output back to the desired level, according to this new IS curve, by how much must the interest rate be lowered from its initial level of 0.1, assuming that T and G remain at 2. Call this case 2. 5. At the new lower interest rate and at full employment, on the new LM curve (LMg) what is the new level of the money supply

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